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MBA Reports Drop In Refinances And Jump In Purchase Applications

Katie Jensen
Jan 20, 2022

Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years.

KEY TAKEAWAYS
  • For the week ending January 14, 2022, mortgage applications increased 2.3% from one week earlier. 
  • The refinance index decreased 3% from the week prior and was 49% lower than the same week last year.
  • The seasonally adjusted purchase index increased 8% from one week earlier.
  • "FHA and VA refinance declines drove most of the refinance slowdown," said Joel Kan, MBA's associate vice president of economic and industry forecasting.

According to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending January 14, 2022, mortgage applications increased 2.3% from one week earlier. 

The Market Composite Index, which measures mortgage loan application volume, increased 2.3% on a seasonally adjusted basis from one week earlier. The index increased 3% on an unadjusted basis from last week. Meanwhile the refinance index decreased 3% from the week prior and was 49% lower than the same week last year. The seasonally adjusted purchase index increased 8% from one week earlier. The unadjusted purchase index  increased 14% from last week and was 13%  lower than the same week a year ago. 

"Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years. The 30-year fixed rate reached 3.64 percent and has increased more than 30 basis points over the past two weeks. FHA and VA refinance declines drove most of the refinance slowdown," said Joel Kan, MBA's associate vice president of economic and industry forecasting. "Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity. The average loan size for a purchase application set a record at $418,500. The continued rise in purchase loan application sizes is driven by high home-price appreciation and the lack of housing inventory on the market - especially for entry-level homes. The slower growth in government purchase activity is also contributing to the larger loan balances and suggests that prospective first-time buyers are struggling to find homes to buy in their price range."   

The refinance share of mortgage activity fell to 60.3% of total applications from 64.1% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.8% of total applications.

The FHA share of total applications decreased to 9.3% from 9.9% the week prior. The VA share of total applications decreased to 10% from 11.4% the week prior. The USDA share of total applications remained unchanged from 0.4% the week prior.  

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 3.64% from 3.52% with points increasing to 0.47 from 0.36 for 80% LTV loans. 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.64%from 3.50%, with points decreasing to 0.44 from 0.45 for 80% LTV loans. The effective rate increased from last week.  

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.95% from 2.73%, with points increasing to 0.43 from 0.35 for 80% LTV loans. The effective rate increased from last week. 

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